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The 360 Deal: Bands as Brands

The music industry has become of late, unabashedly about selling products. Formerly, 10 or 15 years ago, there used to be more pretense to artistry. Many if not most bands would eschew “selling out.” It was not only seen as bad for the creative muse, it was bad for business as fans tended to shun artists who took that route. In those bygone days, “artistic integrity” meant that commercial tie-ins were tightly controlled in recording artist agreements. The artist was able, and almost encouraged, to prevent commercial tie-ins. This was an anomaly in most deals because few other commercial terms were negotiable as far as the labels were concerned. When it came to preventing labels from creating tie-ins with commercial products, bands often had the last say.

So much has changed, in so little time. Most everyone has decided it’s OK, after all, to scramble for the almighty bucks being waved by advertisers and sponsors. In part, this is because there is less and less reliable revenue from CD sales. In part, this is because record companies have done a good job of scaring artists into believing that the industry is depressed due to peer-to-peer file sharing. In part, this is because the lifestyle of music has become woven into so much of what we do. For many reasons, bands are now operating as brands, with emphasis placed not just on the copyrights in the compositions and recordings themselves, but more and more, on the trademarks and goodwill being exploited.

And like all valuable brands, those rights need to be managed. From a trademark point of view, this means going after other confusing trademarks or knock-offs. From a marketing point of view, this means keeping brand awareness front and center. It makes one wonder, as the role of distribution of physical product dwindles for record companies, whether they are really just advertising agencies for their artists’ brands. And if that’s the case, does a 360 deal make sense?

The 360 deal is the record industry’s answer to declining sales of physical products. But really, this has been happening for a long time. Traditionally, record companies made records (CD’s, vinyl, i.e. physical products). So it was natural that artist royalties would be based on sales of those products, and that all other revenue belonged to the artist. Then, it became more usual to find record companies demanding a rate on mechanicals (i.e. payments to the music publishers representing the composers whose songs were being recorded) for so-called controlled compositions (i.e. songs composed by the artist or band under the recording contract). Then it became common for the record company to demand an ownership interest in those compositions. And on and on. And please, as far as A&R is concerned, labels are great at jumping on bandwagons and telling artists how they should make their art, but with some exceptions, they rarely create successful acts from scratch. So here we are with the 360 deal, where the label takes a cut of the artist’s entire career.

The quid pro quo is supposed to be, that with the 360 deal, the label can get behind the artist, bankrolling and pursuing alternative revenue sources. But what are those revenue sources, really? Touring? That’s always been sacrosanct, because without the meager profits from grinding it out on the road, many bands would not survive to record another album. Is a label really going to commit resources, for the long haul, to a band that’s playing to 50 people a night, in the hope that someday they’ll be huge? Dream on. Sure there is room in a 360 deal for a better slice of the pie to be cut for the artist. 15% can become 30%, if you’re talking about giving the label a piece of everything. But will the label dare to spend money it might not recoup? The same risk aversion and risk taking principles apply, whether it’s a conventional deal or a 360 deal. Everyone prefers a sure thing. Risk is, well, risky. When big money is being spent, who do you think has the last say in how it’s spent? When revenue might come in through commercial tie-ins these days, to recoup that big money, who do you think is going to have the last say in how the rights are exploited? Except for mega-stars perhaps, not the artist.

Meanwhile, where are all the managers? Well, managers tend to not invest their own money into a project. They might be better suited for the focus that’s needed to place artists into lucrative product endorsement deals. But they tend to not have the resources to launch an artist. Face it, recording an album, making a few videos, then promoting the singles to radio, does not come cheap.

In my opinion, as the clout of the record labels continues to decline, their 360-deal-death-grip on artists will loosen, and it’s not going to be the artists themselves or their managers who end up controlling the music we hear, it’s going to be the advertisers and the sponsors themselves.